Kinetex’s Liquidity Aggregation Mode: Automation with Relay Nodes
Dubai, UAE, 29th December 2023, Overcoming the unreasonable complexity often found in DeFi products and services has been one of Kinetex’s priorities. The team quickly realized the tremendous importance of user-friendliness and simplicity when it comes to ensuring the successful future of the DeFi industry. Therefore, Kinetex has been focusing on creating solutions that are not only innovative but also effective and accessible.
In the Liquidity Aggregation mode, the Kinetex team implemented the Kinetex Advanced Router, discussed recently, and an automation feature. Both help to simplify user experience when swapping via the Kinetex dApp, allowing even less tech-savvy users to take advantage of many opportunities DeFi has to offer. Let’s look more closely at automation in this post.
The Significance of Automation
Despite the constant enhancements and appearance of new solutions, cross-chain technologies still have a couple of downsides, especially when dealing with complex, multi-network routes. Such routes often go through cross-chain bridges known for their high gas costs and slow processing speeds. For instance, the transfer of assets through one bridge can take anywhere from 15 to 30 minutes, depending on the technology utilized and the block confirmation time of the networks engaged in the swap. Additionally, the need for manual control can be pretty exhausting for users, as they must stay online throughout the swapping process.
Guided by a desire to enhance the efficiency and ease of use of the DeFi industry as a whole, with a special focus on cross-chain solutions, Kinetex launched an automated swap execution available on all big EVM-supporting networks such as Ethereum, BNB Smart Chain, Arbitrum, Avalanche, Polygon, and others.
Automation is implemented through relay nodes that conduct each smart contract automatically in all supported networks. These nodes not only execute transactions but also determine gas costs, find optimal routes, and handle intermediate assets without requiring additional user input. As a result, Kinetex streamlines the swapping process, releasing users from confirming each of a swap’s steps individually.
Moreover, relay nodes can seriously enhance the security of user funds during crypto transfers. As transaction relays, they facilitate the transfer of assets to designated points and back to users’ balances, ensuring no unnecessary interactions with liquidity or account balances exist.
How Does It Work?
When users want to start an automatic swap, they only need to grant access to the tokens they wish to swap and sign the relevant route data. Once the relay nodes receive the signature, they can take over and complete the swap on their own, allowing the users to exit the dApp without wasting time waiting.
As previously mentioned, relay nodes will also handle gas payments, eliminating the need for users to manage native coins for gas fees. Relay nodes facilitate fee payments either by charging from the swapped assets (available for tokens supporting the EIP-2612 standard) or by offering the escrow method (in which users must make a small deposit first).
Bridge-related Challenges
It is common practice to utilize bridges that can perform a callback to the target network while the token transfer is happening. Thus, using the cross-chain messaging protocol, which can transfer liquidity and data within a single transaction, allows for sending additional swap instructions.
However, this approach has some disadvantages. First, only certain bridges support simultaneous data and liquidity transfer. Next, this method incurs additional gas costs. Last, the entire swap route is exposed to the public, increasing predisposition to MEV attacks.
Kinetex was able to overcome those disadvantages with the automation solution. The relay nodes help interact with funds received from any bridge by transferring them to a user-owned minimal proxy smart contract and then launching the subsequent swap steps following the route signed by the user.
To protect users from potential MEV attacks, Kinetex splits the routes into several parts, equivalent to the number of networks they consist of. As the swaps progress, each part is passed to the appropriate network. This route-splitting enables Kinetex to avoid disclosing the complete route during swap initialization.
Conclusion
The team at Kinetex has been putting in a lot of effort to ensure that their products are designed with users in mind and are easily accessible. Their first solution, Liquidity Aggregation, is a clear example of their commitment to making the DeFi space more accessible and encouraging. Since all trades made using the Liquidity Aggregation mode are executed automatically, Kinetex users are able to crypto in a more straightforward, painless, and efficient way.
As the team moves ahead with the next version of the dApp, Flash Trade, they remain dedicated to providing the best possible user experience and security.
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